Restricted Eligibility for Chapter 7 in McHenry County

The law recently changed to place certain income requirements on people who want to file for Chapter 7 bankruptcies. The law makes determining eligibility a two-step process. First, the person must check their monthly income against their state’s median monthly income. If the person’s income is less than the state’s median, then they pass the test and may file for bankruptcy. Otherwise, they must move to the second step, the means test. The means test requires the person to determine their disposable income and calculate whether they could fund a Chapter 13 plan. If they can, then they may not file for Chapter 7.

Counseling Requirements for McHenry County Bankruptcies

The law also added two requirements about counseling courses.

First, anyone wishing to file for bankruptcy must attend a credit counseling session before they file for bankruptcy. These sessions are designed to help people determine if they actually need to file for bankruptcy, and involve the preparation of a possible repayment plan for the debts. While these repayment plans do not bind the person attempting to file for bankruptcy, the court will look for them to ensure that the person fulfilled the counseling requirement.

Second, at the end of the bankruptcy the law requires people to take a personal finance course, which will teach personal money management. Those looking to meet these requirements should note that the law requires these courses take place through government-approved credit counseling agencies

These new laws increase the complexity of the bankruptcy process. Additionally, they also require the bankruptcy attorneys working on the process to personally guarantee the truthfulness of all the bankruptcy filings. Both these things mean that bankruptcies are harder for attorneys to file and take more time. Unfortunately, this means that fewer attorneys will do the work, and those who do will have to charge more.

Some McHenry County Chapter 13 Filers Will Have to Live on Less

The law also changed the Chapter 13 rules regarding how much money people must put into their repayment plans. Before the change, people could pay off their living expenses, and then contribute the leftover money, their disposable income, to the repayment plans. Under the new rules, a person must still put their disposable income towards the repayment plan, but, if their income exceeds the state median, they calculate what income qualifies as disposable in a new way. Rather than using actual expenses, the law limits people to the allowable expense amounts, which the IRS sets.

Other McHenry County Bankruptcy Changes

The new laws also made other changes to the bankruptcy rules. For instance, the law now values property by how much it would cost to replace, rather than how much it sells for at auction, which can increase the amount of property that is eligible for liquidation. Additionally, the law alters the residency requirements for using a particular state’s exemption laws, which affect which property the filer of bankruptcy gets to keep.

For help with bankruptcy questions, please contact us at Newland & Newland today. We provide support to clients in Lake County, McHenry County, Cook County, DuPage County, Crystal Lake, Arlington Heights, Barrington, Palatine, Rolling Meadows and throughout Northern Illinois.